Walmart's Visa card rejection a bargaining tactic, business prof says

Walmart's decision to stop accepting Visa cards in Thunder Bay before implementing the change in any other Canadian market shows the retail giant is still "testing the waters," a member of Lakehead University's business faculty said.

Local stores won't accept Visa cards starting July 18

Walmart announced on the weekend it will start phasing out the acceptance of Visa credit cards, beginning in Thunder Bay next month. (Damian Dovarganes/Associated Press)

Walmart's decision to stop accepting Visa cards in Thunder Bay before implementing the change in any other Canadian market shows the retail giant is still "testing the waters," a member of Lakehead University's business faculty said.

Walmart announced on the weekend it will no longer accept Visa cards due to high fees required by the credit card company.

Thunder Bay will be the first market to undergo the transition. Under current plans, Visa cards won't be accepted in local Walmart stores as of July 18.

Walmart has said Thunder Bay is first on the list because the chain has the infrastructure in place to make the change easily.

But Farshid Shams, assistant professor of strategic management with Lakehead University's faculty of business, believes there's more to it.

"They don't want to really roll it out quickly provided they can reach a deal with Visa," Shams said. "Thunder Bay is a small, local city, so the effects would not spill over to other cities."

"They want to test the waters, see the reactions, study the reactions of customers."

All sides will be affected

"We have got three different stakeholders here — one is Visa, the other is Walmart, and the third important stakeholder that nobody talks about is the customers," Shams said. "I believe all of them are going to be harmed to some extent."

Walmart's decision will drive some customers away to other stores, he said.

"But it seems that they've reached a level of confidence," Shams said. "They don't really think it is a big issue for them. They are comfortable with that, and I think that by the end of the day, it pays off."

Visa is more vulnerable, Shams said, and will likely lose credibility.

"If you can't use your Visa card at Walmart, that means something," he said, adding that if Visa gives in to Walmart's demand for lower fees, that could inspire other retailers to do the same.

Meanwhile, Walmart and Visa are showing customers they're no longer the most important factor in the decision-making processes of large corporations.

"In the past, everybody was fighting tooth-and-nail to keep individual customers," Shams said. "Customer loyalty was at the centre of their strategies. Nowadays, it doesn't seem to be — at least in this case."

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